Bush Defends Size of Surplus And Tax Cuts

By FRANK BRUNI

Published: August 22, 2001

INDEPENDENCE, Mo., Aug. 21—
President Bush defended his tax cut today as affordable and essential to revitalizing the economy, and he waded into an intensifying battle with Democrats over who is to blame for the rapidly shrinking federal budget surplus.

In an unusually long and impassioned speech here that reflected the rising political stakes of the fight, the president insisted that the gravest danger to federal surpluses was increased spending by Congress, and he cast himself as the vigilant guardian against that.

''The federal budget will have the second largest surplus in history,'' Mr. Bush told an audience of several thousand people at Harry S. Truman High School, referring to figures for the current fiscal year to be released on Wednesday by the White House Office of Management and Budget.

The report, Mr. Bush said, will ''show in plain terms that we have fully funded and will be able to fund our nation's priorities and that we have enough money to preserve and protect Social Security'' while safeguarding Medicare and reducing the federal debt. He said this was possible despite a sluggish economy, in part because his administration ''took exactly the right action, at the right time, by pushing the largest tax cut in a generation.''

He warned Congress that he would fight spending bills that went beyond the budget resolution it passed several months ago.

Referring to himself and other Americans, he said: ''We don't want the budget to be a hollow noise. We want the budget to be real, and that's why I've been given the power of the veto.''

Mr. Bush's remarks were an advance salvo in the skirmish over appropriations bills for the next fiscal year. Budgeting, an almost inevitably fractious process, will come to a head in September and October.

But the remarks were also -- perhaps principally -- a prelude to a broader political battle sure to be set off by the release of the White House budget office's report and of a similar report by the Congressional Budget Office later this month. Both are expected to show dwindling surpluses as a result of the economic slowdown and the tax cut that Mr. Bush pushed through Congress last spring.

Administration officials said the report of the White House budget office would show a surplus of about $160 billion for the current fiscal year, which will end on Sept. 30. At the beginning of the year, the Congressional Budget Office predicted a surplus of $281 billion for the year. The surplus for the last fiscal year was $236.9 billion, a record.

All or almost all of this year's remaining surplus will come from the Social Security system, which politicians in both parties have declared off limits for general spending or tax cuts.

Before a change in federal accounting that the Bush administration announced last week, the report by the White House budget office had also been expected to show that the tax cut and the decline in tax receipts related to the slowing economy had wiped out the non-Social Security surplus and perhaps dipped into the Social Security surplus as well.

Using the Social Security surplus would not have any immediate effect on the government's ability to pay benefits to retirees, although it could influence the nation's long-term fiscal health by limiting the amount of money available to reduce the national debt.

But the Democratic National Committee began running advertisements today that accused the president of gross fiscal irresponsibility, of raiding or endangering Social Security and Medicare surpluses and of not ''protecting our seniors.'' Democrats also responded quickly to Mr. Bush's speech.

''When this president came to office,'' said Representative John M. Spratt Jr. of South Carolina, the senior Democrat on the House budget committee, ''we gave him a gift that no president in recent times has enjoyed: a budget that was in a healthy surplus and surpluses that were projected for 10 years, at least, to come. Now, within less than eight months, we're dealing with the consequences of budget actions that were not well considered.''

Senator Robert C. Byrd, the West Virginia Democrat who heads the Senate appropriations committee, said ''more and more people are coming to realize that the tax cut was a mistake and a colossal mistake.''

Mr. Byrd said he would like the Senate to review and reconsider elements of the tax cut that benefited the wealthiest Americans, although he said this was unlikely at present. The tax cut won 12 Democrats' votes in the Senate and 28 in the House.

And Representative Richard A. Gephardt of Missouri, the House Democratic leader, said, ''The Bush tax cut has wiped out the surplus, invaded Medicare and stayed out of Social Security only by employing a ridiculous accounting gimmick.''

Democrats also complained that the economic growth of 3.2 percent that the White House budget office was expected to forecast for 2002 was overly optimistic, an example, in their view, of machinations by the administration to make the president's budget arithmetic work.

Mr. Bush's speech here was his first full response to such criticism, which had been increasing in the last week. Although much of the 40-minute speech echoed his remarks during his campaign for president, it was staged with unmistakable symbolism. To emphasize his stated interest in transcending partisan squabbling, he visited the hometown of President Harry S. Truman, a blunt Democrat, and spoke at a high school named for him. A portrait of Truman hung a few yards from Mr. Bush's lectern.

Mr. Bush spoke without a prompter and glanced only occasionally at notes, a departure from his usual approach to remarks as long as these. He was also more animated than usual, and people in the audience rose three times to applaud.

The president said the economic slowdown ''began last year,'' before he took office, adding, ''The slowdown is serious, folks; make no mistake about it.''

He said tax reductions were an answer and an antidote to the slowdown, maintaining that the lawmakers who voted against them ''resent tax relief because they wanted more of your money in Washington'' so they could spend too much of it. And, he said, those lawmakers would go beyond the budget resolution by declaring nonexistent emergencies and decrying nonexistent spending cuts during the tussle over the spending bills.

Democrats said Mr. Bush's request for large Pentagon spending increases belied his claim to fiscal restraint, and suggested that the military budget was the first place they would look for savings to make sure that the budget did not use Social Security money.